The car will need maintenance the rdyear worth and the year
P/Y = 12
PV = $325,000
2. A 30 year variable rate mortgage offers a first year teaser rate of 3%. After that the rate starts at 5.5% adjusted based on actual interest rates. If the mortgage is $325,000 compute the monthly payment during the second year,if the interest rate increases to 5.5%.
$1831
FV = 0
PMT = ? = $1,370.21
N = 29*12 = 348
FV = 0
I/Y = 3.99%
N = 5*12 = 60
4. Peter buys a car worth $22,000 by putting a down payment of 30% and taking a loan for the balance amount. The loan carries an interest rate of 5.99% over a period of 3 years and needs to be paid on a monthly basis. What is the total interest Peter is expected to pay over the life of the loan?
Approximately $1,464
PMT = ? = $468.43
2nd AMORT to get total interest paid on car
I/Y = \4.99%
N = 5*12 = 60
6. Consider a 15 year fixed rate mortgage for $175,000 at nominal interest rate of 8%. If the borrower wants to pay off the remaining balance on the mortgage after making the 9th payment, what is the remaining balance on the loan? Assume monthly payments.
$170,325
PMT = ? = $1,672.39
2nd AMORT to get balance after the 9th month
I/Y = \8%
N = 20*12 = 240
8. Consider a loan of $175,000 at nominal interest rate of 4.65% for 30 years. How much of the payment during the first year goes towards principal? Assume monthly payments.
$2,749
PMT = ? = $902.36
2nd AMORT to get total principal during the 1st year
I/Y = \8%
N = 30*12 = 360
10. Consider a loan of $220,000 at nominal interest rate of 4.65% for 10 years. How much of the payment during the first year goes towards principal? Assume monthly payments.
$17,696
PMT = ? = $2,295.99
2nd AMORT to get total principal during the 1st year
PV = $28,000 N = 5*12 I/Y = 4.99% FV = 0 PMT = ? = $528.27
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Sales Tax | $28,000*.06 = $1,680 | ||||||||||||
| Maintenance Cost | $525 | $825 | |||||||||||
| Annual Payments | $528.27*12 = $6,339 | $6,339 | $6,339 | $6,339 | $6,339 | ||||||||
| Cost of Owning | $1,680 | $6,339 | $6,339 | $6,864 | $7,164 | $6,339 | |||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||
| Rent | - | $5,400 | $5,400 | $5,400 | $5,400 | $5,400 | |||||||
| + Residual Value | $9,800 | ||||||||||||
| - Cost of Owning | $1,680 | $6,339 | $6,339 | $6,864 | $7,164 | $6,339 | |||||||
| Ownership Operating Advantage | ($1,680) | ($939) | ($939) | ($1,464) | ($1,764) | $8,861 | |||||||
12. Calculate the cost of Owning this car in year 1.
Leasing since IRR is 9.29%
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Rent | - | $450*12 = $5400 | $5400 | $5400 | $5400 | $5400 | |||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||
| Residual Value | $28,000*.35 = $9,800 | ||||||||||||
PV = $28,000 N = 5*12 I/Y = 4.99% FV = 0 PMT = ? = $528.27
14. Calculate the expected house price at the end of year 5.
$248,910
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Down Payment | $20,000 | |||||
| Opportunity Cost of Down Payment | $20,000*.05 = $1,000 | |||||
| Maintenance | $1,500 | |||||
| Insurance | $1,200 | |||||
| Property Tax | $5,500(1-.20) = $4,400 | |||||
| Total | $20,000 | $8,100 | $8,100*1.025 = $8,303 | $8,303*1.025 = $8,511 | $8,511*1.025 = $8,724 | $8,724*1.025 = $8,942 |
16. Calculate the Post tax Mortgage Cost (principal repayment plus after tax interest cost) for year 1.
$42,896
Year 4: P1 = 4 P2 = 4, arrow down til INT = $2945; PRN = $41,351
Year 5: P1 = 5 P2 = 5, arrow down til INT = $1498; PRN = $42,798
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Rent | - | $950*12 = $11,400 | $11,400*1.025 = $11,685 | $11,685*1.025 = $11,977 | $11,977*1.025 = $12,276 | $12,276*1.025 = $12,583 |
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Rent | - | $11,400 | $11,685 | $11,977 | $12,276 | $12,583 |
| +Selling Price | $248,910 | |||||
| - Mortgage Cost | $42,896 | $43,158 | $43,428 | $43,707 | $43,996 | |
| - Cost of Owning | $20,000 | $8,100 | $8,303 | $8,511 | $8,724 | $8,942 |
| Total | ($20,000) | ($39,596) | ($39,776) | ($39,962) | ($40,155) | $208,555 |
18. Calculate Ownership Operating Advantage in year 4.
($40,155)
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|---|
| Rent | - | $950*12 = $11,400 | $11,400*1.025 = $11,685 | $11,685*1.025 = $11,977 | $11,977*1.025 = $12,276 | $12,276*1.025 = $12,583 |
Selling Price:
PV = $220,000 N = 5 I/Y = 2.5% PMT = 0 FV = ? = $248,909.81 = $248,910
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| After Tax Interest Cost | - | $7000*(1-.20) = $5600 | $5695*(1-.20) = $4556 | $4344*(1-.20) = $3475 | $2945*(1-.20) = $2356 | $1498*(1-.20) = $1198 | |||||
| Principal Repayment | $37,296 | $38,602 | $39,953 | $41,351 | $42,798 | ||||||
| Post Tax Mortgage Cost | $42,896 | $43,158 | $43,428 | $43,707 | $43,996 | ||||||
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||
| Down Payment | $20,000 | ||||||||||
| Opportunity Cost of Down Payment | $20,000*.05 = $1,000 | ||||||||||
| Maintenance | $1,500 | ||||||||||
| Insurance | $1,200 | ||||||||||
| Property Tax | $5,500(1-.20) = $4,400 | ||||||||||
| Total | $20,000 | $8,100 | $8,100*1.025 = $8,303 | $8,303*1.025 = $8,511 | $8,511*1.025 = $8,724 | $8,724*1.025 = $8,942 | |||||